The extent to which two of Australia’s major banking institutions are connected to the financial damage caused to clients of Storm Financial is becoming clearer as investigations into the matter continue.
There have been concerns expressed that representatives of the Commonwealth Bank of Australia (CBA) and the Bank of Queensland (BOQ) may have breached the banks’ lending regulations when dealing with Storm Financial on behalf of the collapsed planning group’s clients.
Damian Scattini, the Slater & Gordon lawyer acting on behalf of more than 800 former Storm Financial clients, confirmed to Money Management that, in numerous cases, lending documents relating to home loans taken out by Storm clients were incomplete and incorrect.
Scattini said it is “glaringly obvious” from the cases he has examined so far that Storm clients did not have the same lending standards applied to them as other members of the public.
Scattini said in some cases not only was no proof of income provided, but the income levels provided were inflated.
“Well, something’s going wrong because pensioners [are recorded as having] income of $100-$120,000,” Scattini said.
“There’s no proof; it’s impossible to prove because [the income] doesn’t exist.”
Scattini said he has also seen approved loan documents that weren’t signed or even sighted by the client. Scattini said he has found cause for concern in “at least dozens” of cases that he has examined.
Scattini said where Storm clients were granted home loans, 90 per cent were held with either CBA or BOQ, with the greater share of loans being held by CBA.
Both CBA and BOQ have denied any lending standards were relaxed in relation to the clients of Storm Financial.
“Commonwealth Bank has not relaxed its lending standards at any branch,” a spokesperson for the group said.
The spokesperson said the bank believes its lending practices at the time were appropriate.
“All of our standing lending requirements remain when applying for a loan, including proof of income signed by a customer.”
Storm Financial acted on behalf of its clients in facilitating home loans. Scattini said Storm would organise a home loan on a client’s behalf to “get the ante to get into the margin lending”.
Margin loans offered by the CBA group are offered by Colonial Margin Lending. BOQ does not offer margin lending facilities. Until recently they held a white label margin loan agreement with Macquarie Bank. Macquarie has since sold its margin lending book to Leveraged Equities – the margin lending division of the Bendigo and Adelaide Bank, with the latter taking the white label offering with BOQ as part of that deal.
A spokesperson for Macquarie said the margin loans offered to clients of Storm Financial were not part of that white label arrangement, and that they were offered directly from Macquarie through Storm.
At the time of publishing, Money Management was unable to confirm with either Colonial Margin Lending or Macquarie Margin Lending whether they conducted their own due diligence on the income levels suggested by Storm on behalf of clients.
An enquiry to Colonial Margin Lending confirmed that proof of income is required as part of the establishment of a margin loan.
